European ministers' conclusions on financing for development: where is the ambition?

In 13 short paragraphs, the EU’s foreign
affairs council – composed of foreign ministers from EU member states – picked
up important themes such as the fight against tax havens and the need for
responsible financing standards, but said almost nothing new, a worrying sign
of low European commitment levels going into critical financing
for development negotiations in the next two years.

The ministers committed themselves to “the
fight against corruption, tax havens and illicit financial flows” but provided
no further detail on any plans they have for ending Europe’s central role in
creating this problem. The accompanying conclusions on ‘policy
coherence for development’ were similarly silent. The first key test will
be next week’s heads of state Council. The signs do not indicate that the
stubborn resistance of Austria and Luxembourg against passing the long delayed
update to the savings tax directive will be overcome. Eurodad has previously
highlighted that this is the key to unlocking greater exchange of
information between European tax authorities. Further key tests will be whether
the EU can adopt a new anti-money laundering directive with a strong
requirement for public registries of the real or ‘beneficial’ owners of
companies and other corporate structures, and make good on its promises to
expand the country-by-country reporting required of banks to cover all other
sectors. Negotiations are ongoing on both directives between the European
Parliament and the Council, and Eurodad and members continue to push hard for
strong action on these key transparency measures that will help curb the
billions lost by developing countries to tax dodging every year.

The Ministers said they will “continue to
promote responsible lending and borrowing and lending practices” but there has,
so far, been no detail on what they actually mean by this. 2014 will be a key
year to push for some real meat to be put on the bones of this commitment, and to
promote sensible standards, such as those set out in Eurodad’s Responsible Finance Charter. On debt
issues, which a recent Eurodad
report has warned continue to be a major global and European issue, the
Council had little to say beyond supporting “existing debt relief initiatives”
– of which there are none of any significance – and continuing to highlight the
creditor group of the Paris Club, rather than promoting fair and independent
mechanisms for sovereign
debt workout needed in Europe as well as developing countries.

On Official Development Assistance (ODA, or
‘aid’), there was the usual reaffirmation “to respect the EU’s formal undertaking
to collectively commit 0.7% of GNI to official development assistance by 2015”,
even though there are no credible plans to do this, and European aid fell last
year rather than rose, according to the latest
figures. When discounting poor quality “inflated aid” the European CONCORD
Aidwatch coalition estimates that the EU is only halfway to that target, with
less than two
years to go. The EU’s own accountability
report also predicts that the EU will fail to meet the target by a
considerable margin.

There was also a reference to “external
development finance measurement” – code for attempts by some donors to change,
or water down, the way ODA is measured, to artificially boost levels by, for
example, counting more loans as aid, as Eurodad has
warned.

The support for the European Commission’s
efforts to use aid money to subsidise or ‘blend’ with private investment which
was apparent in the Commission’s communication, to which these conclusions
respond, was there. However, the affirmation that the EU “will continue to use
grants … for leveraging public and private resources” was tempered by the
recognition of some of the risks highlighted by Eurodad’s recent report
on blending including, according to the Council, “debt sustainability and
accountability and avoiding market disturbances and budgetary risks.”

We will have to wait until the planned
European Commission communication on financing for development early next year
to see if Europe can up its game and bring credible new commitments to the UN negotiating
table, as financing takes centre stage in negotiations on the UN’s post 2015
development objectives.